Abstract
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Traditional literature such is Tiebout (1956), Musgrave (1959) and Oates (1972) suggest that the economic case for decentralization is made by arguing that the devolution of tax and expenditure authority yields greater public sector efficiency.
Outcome of fiscal decentralisation much depend on the way the process is designed and implemented, on adequate subnational capacity and on the quality of multi-level governance. Also, decentralisation, if it is properly conducted, may be conducive to growth (Ivanyna and Shah, 2014; Iimi, 2005; Akai et. al, 2004) and revenue decentralisation seems to have even more positive impacts.
On the other side, the term “tax autonomy” captures the extent of freedom sub-central governments exert over tax policy. It encompasses features such as sub-central government’s right to introduce or to abolish a tax, to set tax rates, to define the tax base, or to grant tax allowances or reliefs (Blöchliger and Nettley, 2015). Enhancing tax decentralization implies a better alignment between spending and funding responsibilities and, as remarked by several economists, a potential improvement of the efficiency and effectiveness of public services provided to citizens (Boetti et. al., 2012).
The increased spending responsibilities and the limited self-financing power of the local government units in most of the countries raise the question of the degree of their dependence on the central government. This is why we find important to measure and assess the degree of tax autonomy of local governments in selected EU-13 member states by means of a set of indicators followed by the OECD classification of tax revenues ( Blöchliger i Rebesone, 2009; Kim, Lotz i Blöchliger, 2013) for the last 10 years (2007-2016) and to determine one of the effects of fiscal decentralization – local self-government’s tax autonomy. In this paper authors will analyse which countries have less centralised collection of tax revenues and collected local revenues in the mentioned period.
A special attention will be devoted to issues of local government tax structure and position of local governments within the intergovernmental system in selected EU-13 member states. The goal of the paper is to employ comparative research from selected EU-13 member states where there are similar tendencies and processes in regards to fiscal decentralization. The final goal of this research is testing the the degree of tax autonomy of local governments in selected EU-13 member states comparing local tax revenues and proposing measures and activities necessary for implementing the better model in the tax systems of the analyzed countries. The last part of the paper will focus on tax policy recommendations for decision makers both on central and local government level. In the paper we will use OECD Fiscal Decentralisation Database, Eurostat database and Ministry of Finance data of analysed coutries.
The comparison of the tax authonomy indicators shows that local governments are mostly dependent on the central government in selected EU-13 member states and the low amount of revenue is accumulated from local taxes. Similar to that, financial autonomy is considerably lower and control higher in many EU-13 member states. There is, however, a limited number of countries in which local government has the possibility to set rate and base of a major tax without any restrictions from higher levels of government.
Key words: EU-13, fiscal decentralization, local government, tax autonomy
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